Australian Commercial Law

This document discusses various aspects of Australian Commercial Law, including guarantees and negligence. It provides an overview of the rules, applications, and conclusions related to these topics. The document also explores the remedies available to parties involved. The subject of the document is Australian Commercial Law, and it is relevant to anyone studying or working in this field.

Running head: 0
Australian Commercial Law
Address
Student’s Name
9/12/2019

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Contents
Part A.................................................................................................................................2
Issue 1............................................................................................................................2
Rules 1...........................................................................................................................2
Application 1...................................................................................................................3
Conclusion 1...................................................................................................................3
Issue 2............................................................................................................................4
Rules 2...........................................................................................................................4
Application 2...................................................................................................................5
Conclusion 2...................................................................................................................5
Issue 3............................................................................................................................6
Rules 3...........................................................................................................................6
Application 3...................................................................................................................6
Conclusion 3...................................................................................................................7
Part B.................................................................................................................................7
Issue...............................................................................................................................7
Rules...............................................................................................................................7
Application......................................................................................................................8
Conclusion......................................................................................................................9
Part C.................................................................................................................................9
Issue...............................................................................................................................9
Rules...............................................................................................................................9
Application....................................................................................................................11
Conclusion....................................................................................................................12
Bibliography.....................................................................................................................13
Legislations...................................................................................................................13
Case Laws....................................................................................................................13
Books/ Journals............................................................................................................13
Other Resources..........................................................................................................13

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Part A
Issue 1
What steps court would take to check that whether an intention to develop legal
relations was presented between the parties to the case i.e. Sally and Ethan or not.
Rules 1
Majorly two types of contracts are there namely commercial contracts and domestic/
social contracts. In the case of commercial contracts, it is assumed that parties want to
develop legal relations but the problem arises in case of social contracts. In the case of
Balfour v Balfour1 the court provided that generally it is assumed that a contract that has
a social relationship does not have the subjective intention. However, some exceptions
are there where even being in a social or domestic relationship, parties carry the
intention to create a legal relationship with each other. Written contracts are one of such
exceptions. Errington v Errington Woods2 is an important case of contract law where
the court decided that in case of the existence of a written contract, an intention to
create legal relationship reflects in the behavior of the parties3.
1 Balfour v Balfour [1919] 2 KB 571
2 Errington v Errington Woods [1952] 1 KB 290
3 Webstroke.co.uk, Errington v Errington [1952] (Webstroke Law) <
https://webstroke.co.uk/law/cases/errington-v-errington-1952>.

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Application 1
The contract has been developed between Sally and Ethan who have a social
relationship with each other being cousins. At first instance, it seems that they had no
intention to bind each other legally. Nevertheless, they have made a written contract in
respect to the deal of sale of the business and therefore court may held that they carried
such intention applying the provisions of Errington v Errington Woods.
Conclusion 1
Parties made a written contract and therefore in this manner, intention to carry legal
relation may prove.
Issue 2
How the court will check whether the representation made by Sally was the reason to
develop the contract or not? If this would be proving then Ethan, would be entitled to
what remedies?
Rules 2
In the course of this discussion, parties often make representations related to various
facts of the deal. However, such representations are not necessary to be true always. A
misrepresentation is a situation where one party makes a false statement or provides
false representation in other ways to the second party. Only existence of such false
representation is not enough but is also required to prove that the innocent party was
impressed by such representation and entered into contract believing on the same4.
Now the issue arises the way in which this fact can be check. A decision given in
4 Smallbusiness.findlaw.com, Fraudulent Misrepresentation (Find Law) <
https://smallbusiness.findlaw.com/business-laws-and-regulations/fraudulent-misrepresentation.html>.

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various cases helps here that can be used to check that whether the claimant relied
upon misrepresentation or not. The very first case is Horsfall v Thomas5. The decision
of the case is very significant to know as it provides that no inducement seems to be
there when the person to whom such representation has made was not aware of the
same. Another important case is Attwood v Small6. In this case, it was given that if
representee or any of his/her agents checked the validity of the statement made by
respresentator then, later on, he/she cannot claim that he/she has entered into contract
relying on misstatement. The court may use these principles to check the inducement
factor in a case where misrepresentation exists.
The most common type of misrepresentation is a fraudulent misrepresentation. As the
name implies it is a representation where respresentator knows the truth and he/she
has the intention to fraud. The penalties are highest in such cases. The innocent
party/claimant has the right to rescind the contract and he/she also becomes entitled to
ask for damages if any loss occurs to him/her.
Application 2
Firstly the representation made by Sally is likely to be fraudulent because being the
owner of the business she might aware of the fact that business was not doing good
and accounts produced to Ethan were reflecting the false situation. Secondly, to check
whether such representation induces Ethan to enter into a contract or not, the court may
use the decision of cases discussed above. Firstly, Ethan was aware of the statement
hence there is a chance that he was impressed with such representation Secondly he
did not check the validity of accounts. Applying the provisions of Attwood v Small, it
5 Horsfall v Thomas [1862] 1 H&C 9
6 Attwood v Small [1838] UKHL J60

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seems that Ethan entered into contract relying on the misstatement hence remedies
would be available to him.
Conclusion 2
As the misstatement was a fraudulent misrepresentation and induced Ethan to develop
the contract with Sally hence now Ethan can rescind the contract and can also ask the
amount of damages for any loss occurred to him out of this deal.
Issue 3
Is the restraint of trade clause introduced in this case valid in view of court? What
remedied Ethan would be against Sally if the clause proves to be valid.
Rules 3
Restraint of the trade clause is generally void. However, in some of the cases court may
held them valid. These are the cases where insertion of such a clause is reasonable
and not against the public policy. A clause seems to be reasonable when it carries
reasonable time and area according to the industrial standards. Many of the times, the
court held such clauses invalid as they consist very wider scope, which seems
unreasonable for the other party. For instance, in the case of Attwood v Lamont7 the
scope of such clause was very wide and the court decided the same invalid for this
reason. If such clause held to be valid then the suffered party may get the order to
prevent liable party by carrying the business
7 Attwood v Lamont [1929] 3 KB 571: V & L 12.29

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Application 3
The term restraint of trade clause given in this case was 10 years and the area was 100
km that seems to be unreasonable. Although, the clause was for the exact type of
business that Sally sold to Ethan and court may held the clause valid by using
provisions of the case of Attwood v Lamont. Nevertheless, considering the period and
area of restriction it is looking unreasonable because 10 years is a huge period and 100
km also is a larger area.
Conclusion 3
The court would not see the clause reasonable. If Ethan was successful, he could close
down the business of Sally.
Part B
Issue
What guarantees apply in this case? What action sally has under Australian Consumer
Law (hereinafter mentioned as ACL) and what remedies seem to be available to her.
Rules
Australian Consumer law can be found under schedule 2 of Competition and Consumer
Act 20108. Starting the discussion from guarantees mentioned under this piece of law
this is to state that these guarantees ensure that consumer receive goods and services
within a particular time, and such goods and services are safe, durable and so on.
Section 60, 61, 62 and 63 of ACL prescribe the guarantees that a consumer has in
respect to the services availed by him/her. Provisions related to guarantee of services
8 Competition and Consumer Act 2010

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are mentioned under section 61 of ACL. The section states that it is a statutory
guarantee that the service provider is providing services with due care and skills. In
other words, this is to mention that this section ensures good quality of services and
protect the interest of consumers in those cases where the services received by them
lack skills or quality that harm the consumer in any way.
Any right or entitlement seems to be incomplete where penalties or remedies are not
associated with the same. These remedies and penalties ensure the delivery of rights.
The same goes for the above-discussed guarantees. Such remedies are mentioned
under section 267 of ACL. As per the provisions of this section, a person can cancel
the contract of services and can demand compensation for the decrement in the value
of services where the failure is major9. The section further adds that if the loss occurred
to the consumer was foreseeable by service provider then in such a situation, the
consumer may also demand damages. The action against the supplier under this
section can be taken when failure to comply with the guarantee occur because of
employee or agent of supplier. Now the question arises what is a major failure. Section
268 of the subjective legislation defines major failure. As per this section situation where
services do not match the quality which is normally necessary to attain desired output
and are not remedied then such situations refers to a major failure10. If provided
services create unsafe circumstances then it is also counted as a major failure.
9 Legislation.gov.au, Competition and Consumer Act 2010 (Australian Government) <
https://www.legislation.gov.au/Details/C2019C00255/Html/Volume_3>.
10 Classic.austlii.edu.au, Competition And Consumer Act 2010 - Schedule 2 (Austlli) <
http://classic.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html>.

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Application
Sally took services of Good Health Help Pty. Ltd. As per the provisions of section 60 of
ACL, these services carried a guarantee to be skilled and with due care. In other, Sally
had reason to believe that services provided by Good Health Help Pty. Ltd. would be
discharge with due care and skills. The issues initiated when she received wrong advice
from the staff member of the subjective medical company. In this manner, staff
members failed to provide the services in an expected manner i.e. as in a reasonable
manner and breached the provisions of section 60 of the act. Firstly, to discuss the
seriousness of the failure this is to state that the quality of services was not up to the
mark and the loss occurred to Sally cannot be remedied. Further, the advice provided
by a staff member was also created an unsafe situation for Sally hence would be
counted as a major failure. Sally now will be able to seek remedies under section 267 of
the act. She can demand compensation for the reduction in quality of services can
rescind the contract and can claim damages because the risk was foreseeable for Good
Health Help Pty. Ltd.
Conclusion
Sally can sue Good Health Help Pty. Ltd as staff members of the same breached the
guarantee mentioned in section 60 of ACL. She can cancel the contract and ask for
compensation and damages as well.

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Part C
Issue
Is Sally entitled to take legal action for negligence under Common law and statue
against David?
Rules
Some relationships are there, where a person owes a standard of care to others. In
such a situation, a person who owes such standard becomes liable to behave in a
responsible manner. Negligence is defined as a situation where a person breaches the
duty of care i.e. fails to behave reasonably. Under common law, such provisions related
to negligence are mentioned in Tort Law. As per this law, for becoming successful
under a claim of negligence, the following four elements need to be there:-
 Standard of Care11
 Breach of standard of care
 Loss to claimant
 The direct relationship of loss and conduct of the defendant
All these elements are required to be presented in a case. To check the existence of
duty of care in other unidentified relations Caparo test can be used. This test has been
provided in the case of Caparo Industries plc v Dickman12. According to this test three
requirements need to be satisfied to determine the existence of a standard of care in a
case as:-
11 Kären M. Hess, Introduction to Private Security (Cengage Learning, 2008)
12 Caparo Industries plc v Dickman [1990] UKHL 2

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 Parties must have a relationship of neighborhood13
 For defendants, damages must be foreseeable
 For law, imposing the penalty to the defendant must be just and reasonable14
Now to discuss negligence under status this is to mention that every state of Australia
has different legislation containing civil liability provisions. In Victoria, PART X of the
Wrongs Act 195815 carries such provisions. As per the provisions of section 48 a person
is treated as negligent where he/she fails to take precaution against a risk, which could
be foreseen, significant as well as able to prevent by using some precautions. Section
50 of this act states that it becomes obligation of a person who owes duty to other to
give warning regarding risk associated. Section 51 confirms that where negligence is
the main condition of harm it is assumed that negligence caused such harm. Section 44
of the act provides that damages can be claim for negligence under this part regardless
the claim brought under contract or tort.
Application
Firstly, to check the liability under Tort Law, this is to state that using the Caparo test,
the duty of care seems to be there as all the three conditions are satisfied. A relation of
proximity existed between David and Sally. David might have an idea about the
likelihood of an accident because of the nature of the floor and under law, it seems just
to impose penalties to him. As a duty of care was there, other elements are required to
be check. The second element of negligence i.e. breach of duty also been satisfied.
13 Mark Lunney and Ken Oliphant, Tort Law: Text and Materials (OUP Oxford,2 013) 440.
14 Andrew Bradstock and David Eng, Ethics and Public Policy: Contemporary Issues (Victoria University
Press, 2011)
15 Wrongs Act 1958 (Vic)

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David failed to take reasonable steps to prevent the accident and in this manner
breached the standard of care. Sally suffered from a back injury and the main reason
was the negligence of David. Here the third and fort element of negligence also exist.
As all the conditions are satisfied here, Sally can take action against David under Tort
Law.
Sally can also take action under statue as letting the floor wet was the fault of David and
he was responsible to warn Sally about it under section 50 of the act but he did not. The
risk was foreseeable, significant and was able to stop by taking some responsible step
hence David was negligent under section 49 of the act. Lastly the injury of Sally was a
direct result of David’s negligent hence sally would have right under section 44.
Conclusion
Under statue as well as common law, sally has the right to take action against David for
negligence.

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Bibliography
Legislations
Competition and Consumer Act 2010
Wrongs Act 1958 (Vic)
Case Laws
Attwood v Lamont [1929] 3 KB 571: V & L 12.29
Attwood v Small [1838] UKHL J60
Balfour v Balfour [1919] 2 KB 571
Caparo Industries plc v Dickman [1990] UKHL 2
Errington v Errington Woods [1952] 1 KB 290
Horsfall v Thomas [1862] 1 H&C 9
Mark Lunney and Ken Oliphant, Tort Law: Text and Materials (OUP Oxford,2 013) 440.
Books/ Journals
Bradstock, Andrew and David Eng, Ethics and Public Policy: Contemporary Issues
(Victoria University Press, 2011)
Hess, Kären M., Introduction to Private Security (Cengage Learning, 2008)
Other Resources
Classic.austlii.edu.au, Competition And Consumer Act 2010 - Schedule 2 (Austlli) <
http://classic.austlii.edu.au/au/legis/cth/consol_act/caca2010265/sch2.html>

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Legislation.gov.au, Competition and Consumer Act 2010 (Australian Government) <
https://www.legislation.gov.au/Details/C2019C00255/Html/Volume_3>
Smallbusiness.findlaw.com, Fraudulent Misrepresentation (Find Law) <
https://smallbusiness.findlaw.com/business-laws-and-regulations/fraudulent-
misrepresentation.html>
Webstroke.co.uk, Errington v Errington [1952] (Webstroke Law) <
https://webstroke.co.uk/law/cases/errington-v-errington-1952>